The employment of staff is a fundamental issue that all companies entering China need to consider carefully. What rules and regulations apply for the setting up a labour contract? How do employees and employers pay social benefits and taxes? What are the differences between employing locals and foreigners? As Representative Offices aren’t allowed to hire local staff directly; how can they employ staff? How can HR outsourcing contribute to solving these issues? These are examples of questions that puzzle companies as they begin the hiring process.
Generally, apart from the usual employment requirement, such as signing contracts with workers, meeting wage standards and issuing salaries in a timely manner, employers in China are also obliged to:
• File all staff employment and dismissals with relevant government bureaus.
• Maintain employees’ personnel files – a unique Chinese document that records all academic and employment history of an employee, and the responsibility of maintaining the records is transferred from one employer to another when the employee changes jobs.
• Withhold and pay individual income tax on behalf of their employees.
• Make monthly contributions to their employees’ social benefits and housing funds.
Most of the above processes are complicated by the involvement of several government bureaus and tedious paperwork. For the unfamiliar, staffing their China operations may pose a challenge and many choose to rely on service providers and HR specialists to guide them though these HR administrations.
The Employment Contract
Under the People's Republic of China’s (PRC) Labour Law, all companies are required to sign employment contracts with their employees. While limited liability companies are allowed to sign employment contracts directly with local PRC staff, a representative office must engage authorized service providers to hire and dispatch the representative office’s local employees.
While there is no standard contract form, the agreement should include:
• Term of contract and probation period
• Job title and description
• Labour protection and working conditions
• Compensation
• Termination conditions
• Breach of contract provisions and disciplinary rules
• Other provisions such as training bond, non-disclosure agreement and non-compete agreement.
The Employee Personnel File and Staff Handbook
Every employee in China owns a personnel file and a proof of employment history. The personnel file details the employee’s education and employment history, and the responsibility of maintaining this file is transferred from one employer to the next when the employee changes jobs. Unlike the personnel file, regulations on the proof of employment history vary across regions. For Shanghai, employers must withhold the employees’ staff handbooks during the employment period. Rep. Offices, which are not allowed to hire local employees directly, must engage a local labour agency to maintain these files.
Related story:
Key Issues For Employing Local Personnel in China - Part II
http://www.bizchina-update.com/content/view/2120/44/
Based in Shanghai, the JLJ Group provides solutions to companies seeking China entry and growth.
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